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UCO Bank is hopeful of coming out of the Prompt Corrective Action (PCA) measure of Reserve Bank of India as it has complied with all key parameters required to come out of the PCA ambit.
PCA is triggered when banks breach certain regulatory requirements such as minimum capital, return on asset, and quantum of non-performing asset.
According to Atul Kumar Goel, MD and CEO, UCO Bank, the bank has managed to comply with all key parameters by bringing down its net NPA to below 6 per cent at 5.45 per cent, maintaining a capital adequacy ratio of 11.70 per cent and a leverage ratio of 3.57 per cent, and also by posting a positive return on asset in the January-March 2020 quarter.
“It (to come out of PCA) is a call that the regulator has to take, but we may discuss or even write to the RBI regarding the same,” Goel told newspersons in an e-interaction to announce the bank’s quarterly results on Friday.
UCO Bank has two overseas branches, one each in Hong Kong and Singapore. With the RBI imposing restrictions on certain activities such aslending, there were certain curbs imposed by the respective monetary authority of the two countries on the overseas branches as well. Goel expects the coming out of PCA to augur well for its overseas branches as well.
Q4 results
Riding on the back of a higher treasury income and recovery from written-off accounts, UCO Bank posted a net profit of ₹17 crore for the quarter ended March 31, 2020, against a net loss of ₹1,552 crore during the corresponding quarter last year.
The bank made a treasury profit of ₹244 crore during the quarter under review when compared with ₹67 crore in the same period last year. The recovery from written-off accounts during the quarter was ₹237 crore (₹85 crore).
Net interest income was down marginally by 3 per cent to ₹1,254 crore (₹1,292 crore). Other income grew by 109 per cent to ₹769 crore (₹367 crore).
The bank is expecting an 8-10 per cent growth in credit this fiscal, primarily backed by demand coming in from agriculture, MSME and retail sectors.
Iran payments
With India no longer importing oil from Iran, UCO Bank is looking at alternative avenues to keep the rupee-payment mechanism with Iran alive. The bank recently had discussions with importers if the mechanism can be used for import of items other than oil.
“There is no fresh inflow in the payment account in the last few months. We are exploring the opportunity to import other commodities such as fresh fruits under the mechanism so that money can come into the account. Our role here is not only settlement, but also to facilitate trade between India and Iran,” he said.
In the wake of US sanctions on Iran, India cannot engage in dollar-denominated trade with Iran. Hence, a special rupee-rial trade mechanism has been put in place. Under this, oil refineries from India deposit rupee in designated banks for oil imports from Iran, and the fund is used to clear of dues to exporters from India to Iran. UCO Bank and IDBI Bank are the two banks that this support payment mechanism.
Rice, tea, sugar and pharmaceutical products are some of the key products exported from India to Iran.
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